With thin profit margins and no extra revenue from smart functionality, TV manufacturers might be tempted to ditch smart TV functionality to save money. Not so fast, say a panel of experts.

At the OTTtv World Summit I moderated a panel entitled Will Smart TV Manufacturers Generate Higher Market Share by offering OTT and IoT services. The panel participants crossed the divide between manufacturers, online video providers and market analysts. This gave us a broad palette of perspectives from which to discuss the challenges facing the TV manufacturing industry.

As part of the discussion, we looked at the opportunity for manufacturers to generate extra revenue from online video and IoT services. This is a critical issue for TV manufacturers as profit margins are wafer thin, and they are looking at any means to generate more revenue.

Overall, the panelists were not optimistic that manufacturers would generate any extra revenue this way. That led me to ask the following question at the end of the panel: Will smart TV’s continue to be smart, or will they become dumb again? Here’s what each of the panelists had to say on the subject.

Move the smarts to a dongle

Liliana Chacon, RTV Colombia

Liliana Chacon, CTO of RTV, a Colombian public broadcaster, thought that the TVs would become less smart.

“They will stay smart, but not so smart. Just to be able to connect to dongles. Just to do that.”

Ms. Chacon said that the main way people in Columbia use smart TVs is to browser to a service’s web site.

Since broadband coverage in Colombia is relatively weak, it is more common for people to access web videos through mobile connections. 3G mobile coverage is much better than broadband in the country. However, mobile data caps are relatively low restraining people’s usage, with one big exception. Mark Zuckerberg, Facebook’s CEO, has negotiated a special deal with Colombia which exempts Facebook usage on fixed and mobile websites from any data caps. That makes Facebook the most important video platform in Colombia.

Pivot point for the emerging skinny bundle pay video world

David Ball, Business Development, TV Partnerships with the BBC, has worked closely with manufacturers to ensure the UK public can get access to BBC content through smart TVs. The BBC, he says, has ported iPlayer to more smart TV platforms than perhaps any other provider in the UK market. He sees a unique opportunity for the platform to take on a critical role in the emerging online TV economy.

David Ball, BBC

“They are going to get smarter. The reason I think that is because all of the trends lead us towards people using multiple devices for connecting to their TV, <and connecting to> multiple services. People don’t just want to go to one pay TV provider to them <services>, they want to be able to pick and choose. The smart TV is uniquely placed to be able to be the pivot point to allow people to pick and choose and put together their skinny bundles of content.”

Toward a standard ecosystem

Evan Manolis spent many years working with Samsung on the company’s smart TV efforts. Samsung has championed the smart TV in the marketplace, and continues to drive a lot of innovation through the platform. Mr. Manolis was the most optimistic of the panelists, saying he thinks there is an opportunity for the devices to realize new revenue streams. However, he sees the platform evolving toward a more open ecosystem approach:

Evan Manolis, Optus

“I think they will continue to get smarter and smarter, and start working more closely with the likes of smart things and Roku’s of the world to have one standard ecosystem.”

This could be very important. The proprietary nature of each manufacturer’s smart TV app platform has been a barrier to creating a meaningful market for service providers and advertisers.

Remain smart, but with no service revenue

Paul Jackson, Principal Analyst – Digital Media, with Ovum, has been covering the smart TV market since its beginning. He painted a bleak picture for smart TV OEMs:

Paul Jackson, Ovum

“It’s going to be a brave manufacturer that puts out a TV that isn’t smart. They <smart TVs> are great ways of lashing together different types of content. Will that generate any more money? No.”

In other words, OEMs will continue to bear the cost and maintenance expenses of the smart TV platform, but will generate no extra revenue from it. Could be those wafer-thin margins are here to stay.

Why it matters

Smart TV manufacturers are struggling to establish new service revenue streams through their devices to offset very thin profit margins.

Though the creation and maintenance of smart TV infrastructure is costing them money, TV manufacturers cannot jettison the functionality.

Consumers may not use the smart functionality, but they still expect it to be there.